Peter Kafka

Recent Posts by Peter Kafka

Index, Union Square Like SoundCloud's Web-Based Tune

Here’s another bet on Web-based music: SoundCloud, a start-up that makes it easy to share streaming music, is about to land a funding round from high-profile investors.

Sources tell me that Index Ventures and Union Square Ventures are leading a “significant” new round for the Berlin-based company. I don’t have a dollar amount, but I’m told that VCs were competing fiercely to get into the three-year-old company, which raised a $3.3 million round from Doughty Hanson Technology Ventures in 2009. The round hasn’t closed yet.

Online music has been a black hole for investors for a very long time. So what’s the attraction here?

In large part, it’s because SoundCloud isn’t dependent on deals with the major music labels. It’s designed to let professional and amateur musicians share their own music with each other and the public, via cloud-based files that the company hosts.

Once the tunes are on SoundCloud’s servers, the service makes it easy to move the stuff around the Web, via its own widget and an API that’s showing up on lots of interesting sites, apps, services and devices, including Facebook and Apple’s iPad. You can load SoundCloud files into Spotify, the streaming music company that Index has also invested in.

The service uses the freemium model, offering most of its capabilities for free, and charging up to $700 a year for more storage and extra features.

You can also use SoundCloud to share music you didn’t create and don’t own–and a “private sharing” option makes it easy to do so discretely. That could leave the service open, theoretically, to copyright claims, a la YouTube.

But so far the company has signed up a million users without attracting the ire of the big labels. And recent court decisions in the Veoh/Universal Music and Google/Viacom cases seem to give user-uploaded services like SoundCloud a lot of legal leeway, at least in the U.S.

I’m told that the company also plans on using Audible Magic’s “fingerprinting” technology, which will make it easier for copyright owners to pull content off the service.

SoundCloud, Index and Union Square all declined to comment.

Here’s an example of SoundCloud at work–a 43-minute (!) mix that Beck has posted to his Web site, which we can also embed here:

Melted Lemons by planned_obsolescence

SoundCloud: The Tour from SoundCloud on Vimeo.


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